Question

Since Anytime Pizza is open 24 hours a day, its pizza oven is constantly on and is, therefore, always using natural gas. However, when there is no pizza in the oven the oven automatically lowers its flame and reduces its natural gas usage by 70%. The cost of natural gas would best be described as a______________.
A) fixed cost.
B) mixed cost.
C) step-variable cost.
D) true variable cost

Answer 1

Answer:

B) mixed cost.

Explanation:

Mixed costs are those that contains components of both fixed cost and variable cost. Examples include insurance, parking fees, and some depreciation.

The fixed component does not experience change as the volume of activity increases, while the variable component changes with activity.

For Anytime Pizza the oven is constantly on and uses natural gas. The fixed component is 70% gas used when there is no pizza in the oven. As pizza is put in cost increases in excess of the 70% natural gas usage.

Answer 2

Answer: Mixed cost

Explanation:

The cost of the natural gas is a mixed cost. A mixed cost is the cost that combines two types of costs (fixed costs and variable costs). A mixed cost is made up of a fixed cost that doesn’t change when production volume changes and also the variable cost that changes when production volume changes.

Mixed costs are also known as semi variable cost. The natural gas is used constantly with the expense incurred on it continuous, therefore it's a fixed cost. Also, when there is no pizza, the usage of natural gas decreases so it's a variable cost. Since it has attribute of fixed and variable cost, it's a mixed cost.